By Susan Mathew and Supriya R
(Reuters) - European shares gained for a second day on Wednesday, extending a recovery from a sharp sell-off at the start of the week, following a report that a Brexit trade deal could be struck later in the day.
The pan-European STOXX 600 index rose 0.3% in holiday thinned trade, after a 2.3% slump on Monday. London's FTSE 100, however, lagged as the pound gained.[.L][GBP/]
A trade deal between the United Kingdom and the European Union is possible on Wednesday after progress in talks on fishing rights, political editor Robert Peston at Britain's ITV (LON:ITV) tweeted.
The news, days before Britain's exit from the bloc after a transitional period, lifted British mid-caps, along with France agreeing to reopen its borders to England on Wednesday.
The detection of a new coronavirus variant had seen much of the world shut its borders to the island country, prompting warnings from supermarkets owners about food supply shortages and hammering stocks across the board on Monday.
"What we're seeing today is very much a year-end feel to markets," said Craig Erlam, senior market analyst at OANDA Europe.
"There is a lot of caution around this new COVID strain and what it means. So, I don't think we can read too much into small gains, especially when they're still partially recovering from one day's losses."
Daimler (OTC:DDAIF) was the top boost to the STOXX 600, up 2.6% after business newspaper Handelsblatt reported that the German luxury carmaker is preparing a stock market listing of its trucks division.
Markets also tracked the latest on the U.S. stimulus deal after U.S. President Donald Trump threatened to not sign the much-awaited $892 billion coronavirus relief bill. He said it should be amended to increase the amount in checks for individuals. [MKTS/GLOB]
The STOXX 600 is on course to end a tumultuous 2020 down about 6%, despite a stunning recovery from the coronavirus-fueled lows hit earlier in the year on ultra-easy monetary policy and vaccine optimism.
Banks and energy shares, closely linked to global growth expectations, are down more than 25% so far this year, with Brexit uncertainty adding to the fall in lenders.
Travel shares, among the worst hit at the onset of the pandemic, are set to end about 18% lower, their worst year since 2008.
On the other hand, technology stocks, seen as winners of the work-from-home trend, are up 12%.
